The Impending Disaster of the Current World Economy

A recent issue of The Economist sports a cover story entitled: “Be Afraid.” The theme of the story is that “unless politicians act more boldly, the world economy will continue heading toward a black hole”. I believe their assessment is spot-on.

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Here are three of the biggest reasons:

1. Europe’s currency, the Euro, is in serious trouble and European leaders are hapless. Because the European Union is a best a loosely organized and almost completely decentralized entity, their ability to work together – especially when only a few of their members perceive the imminence of their danger – is nil. If Greece and/or Italy collapse economically, will Germany and France step up? Probably not with adequate strength or timeliness.
2. Class warfare, especially in the United States and Europe, is heating up. Like the days leading up to the French Revolution, the wealthy are facing increasing levels of acrimony and jealousy. It is fueled not by rational thought, but by politicians who – due to their own failings of leadership – are now casting about for someone – anyone – to blame for the pitiful state of our economy. Nowhere is that more obvious than in America, but it is no less true in Europe and the results are proving to be devastating on a global scale.
3. Emerging markets’ growth is slowing. In the case of China, there is an overshadowing level of debt from 2008-2009 spending. In other cases, it is simply the inertia of the greater world economy. 

There are some significant underpinning weaknesses in the politicians and economists who are failing to lead us out of this crisis, and we shouldn’t be surprised by that; after all, it was politicians who brought us here to the brink in the first place. First of all, they want to find a “fall guy”, and since there is no foreign dictator who can be blamed with sufficient credibility to drum up an economy-saving war, the fall guy has become the wealthy (millionaires and billionaires for the moment.) Secondly, the politicians are focusing on austerity rather than growth. While spending cuts and size reductions are absolutely appropriate for US Government agencies, outside of government spending it is impossible to “cut your way to growth.” Intelligent and insightful investments must be made in innovative enterprises and endeavors to spawn new businesses and extensions built on the platforms of current technologies. Thirdly, there is no central planning and management of global crises. That means that in order to come out of this, the US will need to adopt a policy of increases isolationism (see my blog on that topic), or participate in / submit to a strong world governance body. Of course, a world economic governance body will only help if the members of that body know what they are doing, and have absolute authority to implement and enforce their directives. 

I don’t like our odds in either scenario. What do you think?

2 Responses to “The Impending Disaster of the Current World Economy”

1. Marie Luft says:

   November 8, 2011 at 5:58 pm

   1) I agree.. we know that our bad economy at 1940 was saved by our ramped up efforts during WWII but we really don’t want to do that again.

   2) The call for less government (austerity) is working. Lots of layoffs at the state levels and in the military anyway .. domino effect, which then increases the unemployment number.

   3) A world governance body sounds like something out of the “left behind” books. 🙂 and I don’t think we want that. Anyone who has absolute authority over the money also has absolute authority over the world. No thank you.

   Reply
   • William Duncan says:

     November 12, 2011 at 10:53 pm

     Exactly right.

     Reply